Market Matters

In this edition of Market Matters, Paschke takes a closer look at common financial stresses faced by many Americans and how these concerns impact other areas of economic and personal well-being.

How stressed
are Americans about their financial situation?

Surveys and evaluations indicate a mixed picture on this
issue, with stress levels highly dependent on age, income and gender. A recent financial security survey by MassMutual indicates that 63 percent of middle-income
Americans (those earning between $35,000 and $150,000 annually) say they feel somewhat
or very secure financially. However, the same survey reports that nearly half
(48 percent) worry about their finances at least once a week. That number
increases to 56 percent for those in the $35,000 to $45,000 annual income bracket. According
to the survey, household finances are a greater worry for middle-class workers than
health, marriage, career or affordable housing.

Additionally, financial stress overall appears to be
increasing. The 2017 Employee Financial Wellness Survey by PwC reports that 53 percent of employees feel stressed when dealing with their financial
situation, which is up substantially from 45 percent just two years ago.

Studies suggest that overall levels of financial stress have increased in recent years. (Photo: Getty)

Financial stress also differs by gender, with 52 percent
of women citing financial matters as causing the most stress in their lives compared
to 40 percent of men. Over 50 percent of men feel confident that they could meet
basic expenses if they were out of work for an extended period, while only 35
percent of women feel that way. The stress over having the money to meet
day-to-day necessities has caused 57 percent of workers to change their
spending habits in the past 12 months.

What issues
create the most financial stress for people?

Fifty percent of employees in the PwC survey indicated
that not having enough emergency savings for unexpected expenditures was their
top financial concern. Reports indicate that over half (54 percent)
of middle-income workers do not have enough cash on hand to cover even a $500
emergency expense, while 73 percent can’t cover a $5,000 emergency from
available cash.

Aside from emergency savings, the next greatest source of
financial stress was not being able to retire when planned, which was reported by 29
percent of employees. However, that’s less of a worry currently than four years
ago, when 45 percent of workers ranked it as a major concern. An additional 29
percent of employees said not having enough income to meet monthly expenses was
troubling, which was followed by the stress over being laid off from work
(19 percent of employees) and falling behind on debts (17 percent of
employees).

How is stress
impacted by age? Are millennials experiencing greater financial stress than
older generations?

Financial stress for millennials and Generation X workers is
about the same, with 59 percent of Gen X and 57 percent of millennials reporting that they feel stress about their finances. However, for baby boomers, who are well along in
their careers, just 41 percent report feeling financially stressed. The level
of stress varies by generation, depending upon the specific financial issue. For
example, 54 percent of millennials and 53 percent of baby boomers are confident
they will be able to retire when they want to, but just 40 percent of Gen X
workers are confident about their retirement. Additionally, one-third of
Millennials and Gen X workers are concerned about not meeting monthly expenses,
while only 20 percent of Baby Boomers have that concern.

One of the most interesting generational contrasts
relates to optimism for the future. Forty-three percent of millennials believe
that the next generation will be better off financially than their generation. That’s
a big jump from the 28 percent of millennials who felt that way a year ago. Baby boomers, on the other hand, are much more pessimistic, with only 20 percent feeling
like the next generation will be financially better off, while a majority (53
percent) believe the next generation will be worse off.

Are Americans
stressed about the impact government policies might have on their finances?

American workers are split over the impact of government
policies on their finances, with 38 percent believing the impact will be
positive, while an equal 38 percent are expecting a negative impact according to the PwC
employee wellness report. It’s a different story by gender. Forty-nine percent
of men believe government policies will be positive for their personal finances,
while 28 percent believe they will be negative. But for women it’s nearly the
exact opposite, with 46 percent of women expecting a negative impact on
personal finances and just 29 percent believing the impact will be positive.

Moreover, the confidence in government policies with
regard to finances appears to be inversely related to income–i.e. the lower the
income level, the higher the negative view and vice-versa. For those earning
less than $30,000, 47 percent believe government policies will have a negative
impact on their finances and 28 percent believe the impact will be positive. For
those in the $50,000 to $75,000 income bracket, the expected impact is evenly
split: 39 percent negative and 39 percent positive. However, for those earning
over $100,000, just 27 percent believe the impact of government policies will
be negative, while more than half (53 percent) believe it will be positive.

Stress about money worries can impact other areas of consumers' lives. (Photo: Getty)

What other
impacts does financial stress have on us?

Worrying about money impacts our lives in ways far beyond
just personal finances. The MassMutual survey indicated that money worries had
a negative impact on the mental health and stress levels of 57 percent of
middle-class Americans. In addition to the mental and physical effects of
financial stress, 40 percent of middle-income workers reported a negative
impact on their social life, 34 percent experienced an adverse impact on diet
and healthy eating, and 27 percent said their marriage and personal
relationships had been impacted.

While financial stress is not easily resolved, it is
important for us to find ways of effectively dealing with it, since the
financial, mental, physical and social toll is so high.

What’s the best
way to deal with financial stress over the holidays?

The best place to start is to create an affordable holiday
budget and stick to it. We all know that we’re going to spend more at this time of year,
but it is important to be realistic about how much you spend and avoid taking on new debt with your
holiday shopping. Nothing will add to your financial stress more than a large
credit card bill that shows up after the holidays. Also, it can be helpful to create a calendar and a plan for what you need to do over the
holiday period, what you will be shopping for and include your schedule of
events, in order to give yourself plenty of time to complete everything along the way.

You already know the benefits of shopping online–including
reduced stress–but you might also get some great bargains at brick-and-mortar
stores. Since retailers expect to make around one-quarter of their sales for
the entire year over the November/December period, they are highly incentivized
to provide plenty of bargains to lure you into the stores. Just remember to avoid
the peak periods at the malls and give yourself some breaks to help minimize stress and to keep things in balance.

Finally, recognize that you’re not going to eliminate stress
over this period, since this is a unique time of year with lots of seasonal
activities, celebrations and additional spending. But a little planning and a
few common-sense steps will help keep things in perspective, your budget in
balance and your stress level under control.

Cultural Economics

With money being the number one cause of stress in America,
you could argue that if we aren’t financially healthy, we’re not going to be
physically healthy either. By one recent study, shows that over half of those age 18 to 25
are spending at least as much or more than all their income each
month. At best, they’ve got nothing left at the end of the month and at worst,
they are piling on new credit card debt each month to bridge them over to the
next paycheck. As debt grows, stress grows, to the point that over 90 percent
of those carrying too much debt are stressed out by it. That’s a big deal,
because the deeper the financial hole we dig, the greater the health risk.

Financial stress has been linked to everything from
depression, to migraines, anxiety, high blood pressure, ulcers, heart attacks and
sleep deprivation. (According to one study, two-thirds of Americans lose
sleep at night worrying about money.) Our doctors tell us that to remain in
good health, we need to exercise and eat a healthy diet. If we’re fiscally
sick, we need to do essentially the same thing–e.g. go on a debt diet, while we
work ourselves into better financial shape. Do that and we’ll achieve a
double-barrel benefit, since financial fitness creates a better path to being
physically fit as well.